tv Squawk Box CNBC December 11, 2012 6:00am-9:00am EST
good morning, everyone. and welcome to our special mission critical rise above d.c. coverage. all day long on cnbc, we are here in washington holding lawmakers feet to the fire and finding out if they are doing their part to rise above partisan politics and reach a deal on the fiscal cliff. good morning again, everybody. i'm becky quick. here is what we know right now. the pace of private talks picking up speed as we now have just 20 days left. however, neither the white house nor house speaker boehner's office are giving any public indication that either side is yet prepared to give up real ground. on a road trip yesterday, president obama indicated that he is willing to compromise, just not on that point about an increase in tax for relthy americans. meantime, speaker boehner says he is still waiting on specific spending cuts. joining us now for analysis, tony fratto, of hamilton place
strategies and former white house press secretary and gerald bernstein former economic adviser to vice president joe biden. gentlemen, thank you for being here with us and getting this special day of coverage kicked off for us. >> rising early and rising above. >> exactly. let's talk about this. jared, it seems like things have gotten quieter. do you think that's the case? is that a good sign? >> i think it's probably a pretty good sign. if you look at this morning's papers, you see a number of articles suggesting that there's a bit more compromise in the air. my concern is that tomorrow's papers may say the opposite. so interestingly, there's been some pretty leak free discussions going on, which i actually think is a good thing. they're obviously big, outstanding questions. you mentioned the tax rate issue. one question i keep coming up against is the president and john boehner are now supposedly having good, substantive
discussions. can boehner bring the troops along? if he agrees with the president, can he get enough tea party republicans behind him to sale the deal? because that wasn't the case back in 2011. and, tony, i have to say, both sides seem to have really -- with all the rhetoric we've had leading up to today, it seems to me that both sides have rallied up their bases and i have questions about whether either of them can deliver. >> yeah. i think it makes it really difficult. jared is right, you know, you talk about each element of what an agreement might be. some of them are really big water fall kinds of issues, right? and the rate issue is a water fall kind of issue. you don't meet in the middle. you have to go over and everybody go off the water fall together. >> wait a second. is there a proposal that could be met which would say we're going to raise income tax rates, but we're not going to go back to 39.6%? maybe 37%. >> it is possible, but still it is movement on marginal tax rates, which fundamentally republicans disagree with.
they don't believe they should move on marginal tax rates. that makes it very, very difficult. that makes it a water fall issue, a philosophical movement for republicans. now, is there a price that can be put together that -- to convince republicans that that is a price worth paying? it's possible. you know, they gave a price on revenues, but not on the question of rates. we haven't seen any specifics on what that would be. they would want to see movement on long-term entitlement programs. no one has seen a plan on long ter. >> and that's the thing that boehner's office is discussing. >> exactly. and there's two points there off of tony's observations. first of all, it is possible that you go over the cliff, rates reset, 39-6. then they come back a point or two and everybody declares victory. now, i get that that is sillily because what's the point of going over the cliff if you can work it out a few days later? why not not go over the cliff?
but the tax rates reset. but then they come down and -- everybody declares victory. >> this is how washington operates and this is such a crazy thing that grover norquist can say i -- >> look, i actually think this is all crazy, right? it's all crazy to do tax policy this way. tax policy is really big. my preference would be that we actually go back into the clinton tax rate. it's a much better place to do tax reform. >> you mean for everybody. >> right. we have frightened everybody that it's, you know, a scary place to be in the clinton tax rates now. it's not the tax policy i would prefer for the country, but it is a much better base for going and doing retax reform and doing it in regular order, right? >> and it's a tax structure that did the economy very well as well as the fiscal budget which,
of course, is in temperature plus. i read this morning in the paper something about negotiators are finally getting serious or something like that. it's the central 11. why not get serious last september? >> i think it was david reubenstein maybe who said something about i think we're going to have a deal sooner rather than later and it's not going to be too close to the new year. >> it's later. >> it is later. >> how does this play out now? also, i've talked to some senators who said, yeah, they are expected to be here. maybe they go home for christmas eve and christmas but then they're back home and it's back in session. so this will be cutting down to the wire, maybe down to the very end? >> i was surprised that david reebenstein said that. negotiations always come down to the wire. especially if a side has to give in on a principled position, it has to be the last thing that's given. >> are both sides going to have to give on a principled position
or does the president have the upper hand because of the elections? >> i think both sides are going to have to give in. >> is there an issue where you agree with one and you kick the can down the road? >> if they agree to anything on tax revenue or rates, that's immediate, day one revenue collecting, right? but all we have on spending cuts and especially the entitlement programs are promises to achieve something on the spending side sometime down the road. >> right. i had something something that senator warner had throne out the idea that social security should be delinked from all this. and senator warner is a fine man and i think a lot of people trust him, but i think there's a sense that, wait a second, we
don't want to decouple this. we don't want to split the two. >> i think he has a point in the following sense. these social insurance programs, the entitlement programs, medicare and social security, these are very big, very important programs to people. and the idea that you're jam negotiations on these programs doesn't make a lot of sense. >> yeah, but we knew this was coming. so i agree with that. so i think that the changes we should be making over the past -- actually, it may may changes, would be a better top line. we're going to agree to make this amount of savings. for example, democrats don't like this and i don't think it's a good idea, but the change cpi or the increased in eligibility age, it means testing. these are framework issues. i don't like any of that. >> but the agreement on the commitment to include something on those types of reforms. >> yeah. i think that that kind of thing would move the negotiations
forward. on a policy basis, neither the changed cpi nor the increased eligibility age make much sense to me. >> but you are willing to say even though this doesn't make sense to me, i'm not going to get everything i want? >> marginal cash rates don't make sense. >> but you guys are willing to say yes, we will do that at this point? >> i am. i know tony is. if you're going to compromise, put yourself on the table. >> gentlemen, we want to thank you very much for kicking off this special day of coverage with us. it's great talking to both of you. as we mentioned, our special critical mission is all day long. coming up next hour, we will be sitting down with jeff henserling of texas. right now, let's bring in our coworkers, joe kernen and andrew ross sorkin. thank you. good to see you. >> good to see you, too. >> it wag something to see when
we -- well, i'm not going to go into it. but we hugged it out. >> a big bro man. >> the only thing is, you weren't here, which made it bittersweet. >> we'll have her back tomorrow. >> we will. >> we'll see you tomorrow. we hope you had a good trip down on the amtrak. >> i did. >> hopefully you had the bison chili. >> no. there was no bison chili this time. it was steak or a shrimp pasta or -- >> really? >> yeah. >> i've had the shrimp pasta. >> i had the salad. >> i won't eat bison anywhere but on the amtrak. >> sound policy. >> we'll have more from becky and jim cramer will join her in d.c. for now, let's get up on the morning's top stories. the fed is hold ago two-day meeting in washington and a news conference by bernanke is set for tomorrow afternoon. operation twist expires at the end of this month. the central bank is expected to
maintain its purchase of bonds with longer maturities. and we'll talk more about expectations for what we're going to hear tomorrow, in the next hour, when steve liesman will join us with results of our fed survey. an oh beck minister, important events. opec ministers are in vienna. >> why vienna, by the way? >> i don't know why they originally set it there, but it seems like as good a place as any. have you been? >> i have not been. >> i don't think i've ever been to vienna. i always wondered about that. >> i mean, it's better than meeting in, i don't know, skokie, right? they're expected to retain its 28 million barrel a day output target. but the real drama is likely to be about leadership, the world's leading oil exporters are expected to argue about who should be opec's next secretary
general and we have candidates from iran, iraq and saudi ara a arabia. they're all competing to replace the current leader, as you can see there. abdallah salem el badri, he's 72 years old and he's been there for years. i don't know where i've been for five years, but did you know -- >> i apologize in advance. i didn't. >> you could have said you did and we've been best friends, in fact. >> he's completely changed the entire operation. anyway, did a great job. >> in global market news this morning, stocks in asia, closed mixed today. investors waiting to see what comes out of the fiscal cliff negotiations and in europe, a choppy start to the trading day. investors are waiting for the results of greece's bond buyback
program occurs. joe has some of the big corporate news and this one is actually a global corporate story. >> hsbc. we're talking about paying $1.9 billion in the money lawnering lapses. a brirchb lender admitting to a breakdown of controls, in a statement announcing a deferred payment. yesterday standard chartered agreed to pay $27 million agreeing that it violates sanctions against iran and two other international companies. >> if you're an international bank and you prael without getting into this kind of
trouble? >> no. >> can you actually operate without money laundering? >> i'm just saying, if you're going to be in business in all these types of markets, isn't this going to happen? >> aren't there sxwier countries that would be probably -- that it would stead if you don't want any business tale. >> was there a fascination in this country about whether you want to indict the whole institution or what happens systemically. >> is this your sequel? >> i was on the phone last night. one of the two publishers that are left. we have other news on wall street this morning, morgan stanley said to be considering asking the fed to hold permission to hold a share buyback. "the wall street journal" reporting that the official request could come in early january when the bank is due to
hand over iback tests as part of its buybacks. the company has no purchase requested to give to you. for four years after that, $182 billion buyback. the government offering more than $230 million in shares. the price represents a 2.6% discount. aig closed yesterday. it will raise $7.6 billion. in a statement, treasury's former chief reinstruct during officers jim millstien says no tax player should be pleased with the government had to rescue this company, but all taxpayers should be pleased with today's anounlsment ending the largest of the industry bailouts. but the way, that profit now looking to be about $15.2 billion and people did not expect that we would ever make
money on in deal. i don't know if that makes the deal any better. i don't know if all of the anger and frustration that people have had, that people say, okay, we had a profit and we're okay with it. are you okay with it? >> i'm okay with it, yeah. i feel better. i know you haven't seen this movie, but "mr. smith on goes to washington." he said for so long -- >> where were you looking at on the screen? >> i was just reading it. i don't know. you guys of lost me on that last one. >> aig said et wasn't that interested? >> aig, yeah, what are you going to do? >> it's good to be back. see you. >> let's check on the markets. the one story i thought was interesting today and not only sort of a commentary of what with do for a living, but how hard it is to be a stockbroker
right now. you go over the things that people are concerned with when they talk to their financial adviser and the list is endless. and one client, this is right at the beginning of the article, he just drew a picture. he said, this is what i feel like being in the stock market right now. and that is, you know, after two really big spot selloffs and then a financial crisis. people are still not over this. they're not desensitized from the worry of there could be a significant break at any time. >> do you want them to be is he sensitized? >> yeah. and then it climbs another wall of worry. >> desensitized means not being so worried that they don't go into the market at all. people, the individual investor because of whatever. not trusting markets, high
frequency trading, the financial crisis, very, very difficult. very weary. and we're seeing it in the action in the markets. we're seeing it in the interest in the stock markets and everything else. anyway, markets ended up 14 points yesterday. they're indicated up about, what did it say, about 20 points? we're up 20, but fair value is down 20. so we're actually looking for an opening up of about 49 points. coming up, why netflix could end up doomed with its success with children. but next, the unmanned b-shuttle this afternoon. the unmanned mini shuttle will spend months in either's orbit before returning to land on the kennedy space center's runway. but forecasters are now predicting a 70% chance of not launching today due to expected lightning, thick clouds and bad weather. we might be having this conversation again tomorrow.
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welcome back to squawk. happy monday. today in the "wall street journal" suggesting netflix could end up doomed with its success with children. netflix just for kids get more popular. companies like viacom get accurate. companies provide netflix with most of its content in a kids' focused section. the journal says at some point the suppliers will probably want to charge netflix more or they might even stop selling to netflix. that's been a huge problem for them when it comes to contend more broadly. >> time for the global markets report. kelly evans standing by in london. you rise above over there, kelly. is it vienna, bernanke? what is most -- what do you think is most important to you? it has to be what -- it's what's happening in washington, isn't it? >> no. i say it's up there, top thee, but also on the top three is
what's happening with italian politics. of course, mario monti saying he was going to resign as italy's prime minister. that paves the way for flesh elections to be called in the beginning of next year. yesterday, we saw the negative reaction. sylvia berlusconi wants to make his return on the political scene. today, we saw a bounce back. if you can see see bind me, the bank stocks in italy rerebound, but it's only in the range of .5% to 1% of these names which were down in some cases nearly 10% yesterday. if you take a quick look at european bourses, if that's possible, down near the ftse mib, this is the one selling off somewhere in the range of 3.5% yesterday. today it's adding about .8%. in spain, showing a nice rebound. same attitude listing peripheral debt. we can take a look there. italy and spain seeing prices
rise, yields falling to 4.75% and 5.75% respectively. is investor attention returning to spain? here is the thing. italy is the third biggest government debt market in the world. it's the third biggest economy in the eurozone. whatever happens with its political situation could put neighboring pressure on spain. the main thing to keep an eye on here is whether spain comes back into the markets cross hairs. we saw today an auction go up reasonably well. we're looking for the country still needing to raise significant amounts of money into the new year. and in a final reminder of the ten ewe yigz situation, greece had to extend the time frame of its own buyback of debt to the end of today. for the most part, despite these gyrations and despite berlusconi accusing monti of bad policy,
markets are shruggedel it off after serious losses yesterday. the way it's clear for attention to be focused, i will say, on the fiscal cliff in the u.s. today. >> yeah. italy is important. it's a big economy. we don't -- you know, compared to what's going on over here -- >> i missed mario monti on vacation. >> you missed him on vacation? >> no, i missed -- >> oh, you missed the story. >> it was huge. >> when i was there a year ago, i asked what do those posters say? and it was a picture of him in a beach chair. it said send monti to the beach. it doesn't take long to get -- how long is the average government in italy? >> i don't know. is kelly evans still with us? >> she's gone. that's about as long as a -- her report is about as long as the average government. but they have a figure.
>> let's head to eric fisher on today's weather forecast. maybe he has the answer. >> eric. >> unfortunately not, guys. i know the weather changes quickly, and that's my business here. i don't deal with the italian government too much. but what we're watching for today too much in items of changes, it's colder outside. as soon as you walk out the door, you notice a big change in that cold front. this time yesterday in cincinnati, 17 degrees colder. 30 degrees colder in jackson. still showers around boston and new york city. they'll be out of the way fairly quickly. our main story is florida. miami, naples, picking up showers and thunderstorms. a half dozen tornados across the south yesterday. we'll watch tampa, daytona be h beach, ft. myers. this is the spot for strongest storms to develop. the cold air, finally returning
to deal for many. 50s in atlanta after our average hey hoob around 71 degrees. we're looking at generally average temps tomorrow. the return to average is what makes it feel so cold outside. i can say, guys, that as we head towards the end of the week, wintered is going to return. snow is going to start to return, as well. >> good. that was better than rain. >> i sense your ens tus amp. you're excited about this. >> i am. i know aspen got a foot yesterday. we don't want to waste it on rain. we had 20 inches over on the west coast. move that over. let's get some snow. even back here, we had 39 degrees and raining doesn't help anyone back here, does it? >> no. that's brutal stuff. for you guys. you're watching sunday night into monday into the northeast. that's your next shot. could be a decent storm, could be. >> all right. that's cozy. the fireplace going with the
chestnuts roasting. thank you. coming up, why as many as 10,000 union workers are expected to march on the michigan capital today. if you get a chance, read the lead editorial on the "wall street journal." this might bring us some things you haven't thought about. plus, which bank has the best customer -- a quick glance, and you can see if you're on track. when the conversation turns to knowing where you stand, turn to us. wells fargo advisors. where you stand, turn to us. ...so as you can see, geico's customer satisfaction is at 97%. mmmm tasty. and cut! very good. people are always asking me how we make these geico adverts. so we're taking you behind the scenes. this coffee cup, for example, is computer animated. it's not real. geico's customer satisfaction is quite real though. this computer-animated coffee tastes dreadful. geico. 15 minutes could save you 15 % or more on car insurance. someone get me a latte will ya, please?
well, having a ton of locations doesn't hurt. and a santa to boot! [ chuckles ] right, baby. oh, sir. that is a customer. oh...sorry about that. [ male announcer ] break from the holiday stress. fedex office. good morning and welcome back to "squawk box" here on cnbc. i'm joe kernen along with andrew ross sorkin and becky quick reporting live from capitol hill. we'll have more from becky in our day long coverage of mission
critical, rise above d.c. we'll have more on that at the top of the hour. she will be joined by jim cramer and the incoming chairman of the house financial services committee, jeb hensarling. widening an insider trading probe, the manhattan u.s. attorney's office is said to have launched a broad criminal investigation into whether seven corporate executives cited in that november "wall street journal" article traded improperly in the shares of their own company stock. the article focused on highly beneficial sales by executives that it occurred right before bad news about the company's hit. it protected them from declines in the value of their holdings. it includes cardtronics, micro, cobalt international. and as many as 10,000 labor union workers from throughout michigan and the midwest are expected to march on the michigan capital building today.
they plan to protest a likely passage of a right to work law. the republican-controlled mission house will consider two and perhaps as many as three bills today that would prohibit unions from sourcing private sector workers and government employees to pay union dues. michigan would then become the 24th so-called right to work state. and jpmorgan is jumping to first place in a u.s. customer satisfaction survey. its three biggest rivals, posting a decline in their scores, including perennial lead her wells fargo. but the index finds smaller banks and credit unions continue to record higher numbers than all large banks. let's go to the futures pits now and talk to kevin ferry at cronus futures management. kevin. >> good morning, andrew. >> set up the week for us, if you could, sir. >> okay. well, interestingly, the political situation has kind of kept the fed on the back burner,
because it's probably going to be one of the most important and open meeting that they've had -- we've had in some time. so the markets are preparing for that and the widespread consensus is that we're going to get 40 or 45 billion more of purchases by the fed starting in the beginning of the new year. >> so we've got becky quick and basically half of cnbc down in d.c. today on the fiscal cliff. >> right. >> is there anything you're hearing that is making it better? >> well, here is -- i'll give you the inside from the pit standpoint. interestingly enough, even with the fed, the option market is skewed towards puts in the treasury and calls in the s&p. so there has been, over the past few days, regardless of the news, which hasn't really improved on the fiscal cliff definitely that is a solid dollar betts in the direction that say that people think is
going to resolve in a positive way. >> and positive is pre-january 1st or positive at this point is january 15th? >> good point. i would say it's probably the 13th or 15th of january, not tend of the year, and that's where the focus comes back to the fed tomorrow. unlike before, and probably for political reasons, the fed has been a little bit tight lipped about the details of what they would do. so what buckets they buy in, would they mess around, dudley had a big concept, they might want to mess around with mortgages again. that kind of information would be probably more leaked out to the marketplace by now if it wasn't for the fiscal situation. so there's quite a bit of uncertainty and the fed will definitely have -- it will make for a really exciting process tomorrow. >> it's exciting presser? have they ever done an exciting presser? >> this is his chance to really prove it, i think. yeah. and the surprising thing is, andrew, that it's generally
accepted that they're going to come back in. these are large amounts of -- you're now talking about taking out over 90% of new treasury supply again. so on this is a big deal. given what japan is doing, there are six countries with negative nominal rates already. >> okay. we'll see juicy first half of next year. but kevin ferry, thank you for that. and, joe, before i go, i need to just make one quick comment to you. i said to the audience -- i don't know if you heard this. maybe you were wincing when i said it. i said happy monday. did you hear that earlier in the program? >> no. >> someone e-mailed me and i realized today is tuesday. >> you know how you can guard against that, though? by -- >> never saying -- >> for not wasting the sue pure if a loose anchor speak that -- >> you think happy monday is anchor speak? >> yeah, i do. people don't need that. or happy tuesday or anything.
they know what day it is, most people, he hopefully. >> except me. >> yeah. you don't need to remind them. in our corporate headlines on this wednesday -- i said on this wednesday -- ftx is in exclusive talk toes buy rival ga ardner. bids range from the low to mid 70s. the spx offer is assumed likely to be made of cash and stock at this point. >> okay. and amr's ceo says they want a quick resolution on whether to merge with us airways or file for chamter 11 on its own. now the labor contract has been ratified by all the american airlines unions. at least that's what it's saying now and a big discussion about whether it should have done these deal long ago during the turn use lens over the problems that they've had in the past couple of months. a few stocks to watch here,
urban outfitters getting a pop in after hours trading. the retailer said sales are doing well in the current quarter. big move up. >> you see, this kills me that we can't figure this out. you can see that it's not -- i guess we haven't figured it out yet. it's not up at 37, it's not up at 39.5. >> it's a flaw. >> shares of limited brands also rising late yesterday. and a specialty retailer announcing its board has approved a special dividend of $3 a share to be paid ahead of possible changes in tax rates. we'll fix this, we will. and then there's -- i could ignore it, but i think it's better people at home might -- they need to know that it's above that. and then there's hertz. the shares fell after the company said its three biggest stockholders are selling 50 million shares. carlisle and bank of america,
merrill lynch recently held a 38% stake in hertz. after the offerings, the funds will hold a roughly 26% interest in the rental business. after the sales, hertz will not receive anything from the proceeds of the sale. coming up, squawk on the farm. we're going to talk crops, crops, crops, tractors and other equipment. and what it all tells us about the global economy. stay tuned. >> announcer: team, "squawk box" exclusive coverage of the "new york times" deal book conference. investing, the economy and the looming fiscal cliff. jpmorgan chairman and ceo jamie dimon, carl likely group co-founder david rubenstein and a lot more. it all starts tomorrow at 6:00 a.m. eastern. hi, i'm phil mickelson.
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welco . welcome back to "squawk box" this morning. the dow jones would up 51 points higher, s&p 500 and the nasdaq would open higher, as well. making headlines this morning, john mcafee may be allowed tory main in guatemala for the time being, that is. mcafee's lawyers have filed a request to allow him to stay in guatemala until his legal appeal against deportation to belize would have to be resolved. officials in belize want to question him about the murder of his neighbor, also an american ex pat. he's been evading authorities for nearly a month because he says they want to kill him. this has been one of the crazier stories out there in the world,
swroe. and i have to tell you that on vacation, this is something i did follow. >> wa is it about software and money? >> software, money, drugs, guns. >> you remember that guy that had the -- >> yes, the underground. >> the s&m dungeons. >> that was something. >> prostitutes and free -- i don't know. it's something. >> he also had software money. >> maybe it's the coach. i don't know. let's get to our guest. al, how is the drought in the u.s. affecting the agriculture business? joining us to answer these questions and morning. andrew, you come across that you're going to freeze. >> i nailed this. martin rickenhagen. >> excellent. >> excellent. as the chairman and president and ceo of agco, so many great things to talk about. i think of a company like this in long-term global demographics
are so positive. but then again, depending on global growth, there are cyclical highs and lows for your business, i guess. but that's in the business of trying to farm enough food for the world, i can't see how it's not a great long-term business. >> our business is known to be cyclical, but that didn't happen for the last 20 years. so that means the business is very stable on a very -- or rather high level. you explain to fundamentals it's the going population, foods and changing balance in countries like india and china. so if you eat meat instead of chicken, you have to put in six to eight times the crops. >> and if you're eating chicken instead of rice, that's probably -- >> exactly. >> yeah. >> so that's driving demand and, therefore, some income is very high, which is driving basically the demand for our products and, therefore, we have actually another record year, 2012, and the year at wall street to talk
about this year and to talk about what we plan to do next year and we are planning to top 2012 again. so we are in a very good environment. and in north america, obviously, is important. europe is obviously important. but you're focusing on emerging markets. >> yes. >> even putting manufacturing, which i'm not sure, why would you build -- you're building a $100 million plant in africa. why not just export to avenue from from other places? why build a plant in africa? >> we have going to affect the organization from here. this was a unique opportunity because it was a state-owned factory. we managed to take over and they needed technology. and why produce there is a huge market. there are 1 billion people right now, the population will double. >> on the continent? >> yeah. on the continent of africa. they have a problem with feud security now. they have 60% of the global
reserves of tillable land, which is great news, and only 20% of this land are used today, are farms today. therefore, it is a very interesting market. i'm very proud that we discovered it first and that we will be there also the first to manufacture from the western global players. >> so private corporation. who needs to go into that, the oecd or the investment, some private firms need to come into those countries? yeah. they're all ready, but some of those, this aid money didn't work out that well. so we have a slightly different approach. we opened a fully owned firm in zambia. we called ate demonstration farm where people can -- are invited. we show this is them how mechanized farming has done in the western world. we explained them what teedz to be done. we sell product to them. we finance product to them for
eco finance banks such as the retail bank. and then we actually train them how to use a massey ferguson tractor under the local conditions. we think this is a great concept. and we are now looking into other farms. >> another emerging market. >> 30 farmers are start ago farm, including one full time snake catcher to make farms safe for people over there. >> i guess there are security issues and infrastructure issues. i wish we had more time. maybe you can come back and fill us in for business if it's pretty good. >> yes. we are looking to have a pretty good year for 2013. >> excellent. thank you. >> thank you very much. have a nice day. >> how would you say that last night? >> i'm not going to try. >> richenhagen. coming up, fame, fortune and intrigue. you don't want to miss this. the inside story of the collapse of the family behind the mighty
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today, cnbc takes d.c. >> what we want to know from elected officials is, how are you going to step up and solve the problems? >> as the deadline approaches, we report from the halls of congress. >> we'll ask the tough questions. >> what are you going to do? >> where the negotiations stand. and what's going on behind closed doors. >> where is the compromise? >> mission critical, rise above d.c. all day today. >> congress, get a deal done. welcome back to "squawk box" this morning. the collapse 6 the family behind the anheuser-busch brewing dynasty has remained a mystery until now. the kindle single "the prince of beers" goes behind doors with the final heir to tell the inside story of how everything unraveled. joining us now on the set is
author alex berenson. he's also a "new york times" reporter. i should say good friend. i didn't even know he was coming on the show, joe. >> really? >> i knew just now. but i had nothing to do with having you here. but i'm thrilled to have you here. if those viewers, i talk about his books all the time, i have not read the faithful spy or anything as part of that group. they must go out and buy the book immediately. more importantly -- >> the fourth. what is going on? this is like -- prostitutes involved? >> there was a waitress. >> a waitress. okay. >> so this is sort of the last couple years of ceos behaving badly. you've got mcafee. busch iv arguably had a worse fall. your viewers may be vaguely awa aware, you know, anheuser-busch was sold in 2008. they may have owned bud stock back then. after what happened what isn't really known is how he spiraled out of control. and he really went into this almost suicidal depression.
he was involuntarily hospitalized in 2010. this is less than two years after he's running anheuser-busch. which raises the question of why he was ever allowed to run it. >> was any of this happening when he was at anheuser? i don't know if you remember this, a hit and run. >> i remember someone died -- >> died in his house. there was a woman who died in his car. >> in '83 there was a hit and run. and he honestly has never acknowledged that he was driving. he said he can't remember. so i don't want to say he was driving. because it's never been proven he was driving. but if you think about it, why was a guy who's running a brewery involved -- if he was involved in a hit and run 20 years before, where alcohol -- i shouldn't say hit and run. it was a car accident, where alcohol was involved. and so, arguably, there was like an incredible corporate governance failure at anheuser-busch, where he, you know, his father the third who ran the company for 30 years, essentially overran the board, installed him as ceo in 2006. in 2008, for whatever reason,
august iii decided august iv was not fit to be ceo. he engineered the sale. >> that was part of the whole story that you wrote. the prince of beers is what it's called and you can get it on amazon. but the issue that i was trying to figure out is did they try to sell it to inbev simply to get it away from the son? >> that's a really good question. and only the third really knows. he's not talking. i spoke to the third very briefly for the prince of beers. i spoke to the fourth extensively. and the fourth is a sort of strange, sad guy. >> he's like shooting guns in his house. >> he's doing coke every day. in the end, his mother called child protective services because this woman, this waitress in the house, who was living with him, who is also a drug addict, she was worried about the woman's son, because there were guns and drugs in the house. and again, what's so crazy about this is august busch iii was the ceo less than two years before this happened. so yes, he was having panic attacks, believe it or not, during the takeover fight with inbev. he essentially was overwhelmed
by events. >> where was the board? >> where was the board? that's a great question. >> did everyone know that he -- >> his problems were fairly well known in -- >> family business. not the only time this has happened i guess. money, money corrupts absolutely. and money and power. >> what i was shocked about was how -- how -- what i was shocked about was how was this guy promoted year after year. >> really just arguing for big estate taxes. people should not inherit that much money. >> carnegie's famous line is, and i say this in the prince of beers, three generations in america on shirtsleeves to shirtsleeves. the bushes, five generations. so that's not too bad. >> it happens with lottery winners. >> yes. >> all of a sudden it lands in your lap, and within a year you're like, you know -- >> people always say, you know, member of the lucky sperm club. august busch iv given how tough his dad was, and given how overwhelmed he was, he might actually have been a member of the unlucky sperm club.
he's holed up in his mansion in huntley, he claims he's trying to be sober, he's trying to turn his life around, but he still drinks. so how you can say, you know what, i'm not going to do illegal drugs if you're still drinking, i don't know how that works. >> how easy was it to get him to talk? >> he's a very odd guy. he likes to talk to the media. in fact, i actually found myself liking him because he seems in some ways defenseless. he does not seem like a guy who ran a fortune 100 company. >> right. >> unbelievable. >> alex berenson, money, drugs, software -- the software guy with the dungeon. >> you always say i'm cheap -- >> are you? >> you can get this book on amazon for free. free. download it for free. it's the coolest thing. >> ask cliff robins where he is finding value right now. his name's cliff and we're doing all this program about the cliff. >> plus, mission critical, rise above d.c. jim cramer is going to join becky on capitol hill for a
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time is running out. >> none of it's going to be impossible. the president insists on my way or the highway. >> washington remains at odds. >> that is a bad strategy for america. it's a bad strategy for your businesses. and it is not a game that i will play. >> but the fiscal cliff still looms. cnbc has called on lawmakers to rise above gridlock and reach a deal. now, we're beating down their doors. live from our nation's capital, this is a cnbc special report. mission critical, rise above
d.c. >> welcome back to our special coverage, everyone. this is mission critical, rise above d.c. i'm becky quick, and jim cramer is here with me for the next, oh, three hours or so. >> you bet. >> great to see you. >> great to see you, becky. >> here's what we know right now. we have just 20 days left for the obama administration and house speaker boehner's office to reach a deal on the fiscal cliff. while talks continue privately between both, no public details of progression toward the compromise have been released. in the last hour, our guest, tony fratto who is the former press secretary and jerry bernstein agreed that we would likely get some sort of a deal, just perhaps not in a form that was widely expected. joining us right now is the first of many lawmakers we'll be speaking with today, texas congressman jeb hensarling who is also the incoming chairman of the house financial services committee. and mr. chairman, first of all, congratulations. >> thank you. good morning. >> good morning. thanks for being with us today.
>> happy to do it. >> we hear all of this talk, we hear all the talk that's been leading up to this point. we know it's gone a little quieter at this point. maybe that's a good thing. i also know you've been pretty firm about this. you've said that elections do have consequences. the president is getting his revenues. now he's drawing a line in the sand when it comes to tax rates. do you agree to go along with something like that? or is that a line in the sand for you, as well? >> we've got to look at ways to increase tax rates. it's bad economics. we know that, you know, if you got an unemployed brother-in-law, by raising taxes on your boss, is that boss going to be more likely or less likely to hire your unemployed brother-in-law? we know about the study from the nfib saying that 700,000 americans can go from paychecks to unemployment checks. so we don't want to do that. but becky, the main problem here is, you can't solve this on the tax side. frankly, it's diversionary. you give the president every single job-harming tax increase that he's requested, you run the government for maybe nine or ten
days. you can't get there from here. you know, about two years ago the president said the drivers of our debt are medicare, medicaid, health care. nothing else comes close. i give him an "a" for honest by but an "f" for effort. what we see in many respects, the president doing a bait and switch from what he told the american people. he said he wanted a balanced approach. one dollar of revenue for $2.5 of spending cuts. and now it's kind of like, you know, lucy pulling away the football from charlie brown. he has the right to change his mind but we have the right to call him on it. but america is facing a debt crisis. it is spending driven, and this talk about taxes is, fwrangly, almost -- >> am i right to read between the lines. it sounds like you are saying, it's a possibility, it could be bought if you see significant spending cuts, and dealings with the entitlement programs? >> becky, what i said earlier is this is written into current
law. we know what's going to happen at the stroke of midnight. i didn't vote for any tax increases. i don't want them there. but i recognize them. it's the difference between me bringing something to the table and recognizing it's on the table. house republicans are going to work hard to minimize the increase in tax revenues. we're going to do everything we can to make sure that they are done in a way that doesn't harm the economy. an approach like simpson-bowles, which is to bring down rates, bring down marginal rates, and flatten and broaden the code. start to clear out all the loopholes that unfortunately the president seems to want to protect. but, again, you can't solve it on the revenue side. otherwise we're going to be looking at tax rates that would make france's new socialist government blush. you can't get there from here. >> i'll tell you something, jeb, i'm a stock guy. just like you, you don't want to talk about taxes. let's forget about this whole tax side. i want three ways to cut spending by $500 billion right now. how about we take social security up to 68. how about we slash medicare benefits? and why don't we cut the -- the
defense budget? why do we need people in europe? why do we need them in japan? what are we doing in decree california? i want some answers to this. >> well, go to the web and look for the republican budget. that was written by the chairman of our budget committee paul ryan. you will see these savings -- >> 30-year, 40-year plan. i want to know what we can do -- >> well -- number one, defense has already been cut. we can debate how much it should be cut further but it has already been cut. i mean that's just a fact. >> but we added -- >> -- defense on the republican side. you have that global war turf. -- good idea. >> say again, please? >> global war -- >> here's what you have to do. ultimately you're going to take america off the road to fiscal insolvency. you're going to have to reform current entitlement programs for future generations, which is exactly what we do in our budget. medicare is going broke, social
security is going broke. the four trust funds. you've got one trust fund going broke in about six years -- i'm happy to put that on the table with every other reform. you know, we can't repeal -- we don't want to repeal the laws of demographics. we have more and more people who are getting older and older. again, republicans have put forth a system. we believe that my 84-year-old dad and my 80-year-old mom who relied on this system ought to be able to rely on it. but it ought to be around for my 10-year-old daughter and my 9-year-old son and it won't be. >> you agreed to raise the deficit -- >> we have to put the plan in place today. that's what's important is putting the plan in place today. otherwise, listen, i've put forth plans and i'll be happy to share them with you, you know, that it saved over a trillion dollars back when i was chairman of the republican study committee, the conservative caucus. i mean there's not too many, when you ask where should you cut, where shouldn't you cut? i'd like to be on record saying i'm willing -- don't we bring --
>> i'm willing to cut anywhere in the budget to take the nation off the road to bankruptcy. it's christmastime. we're talking about dickens the christmas carol and the ghost of christmas yet to come. the ghost of christmas yet to come is greece, and now we know that greece is 50% youth unemployment, 25% unemployment throughout the nation. you know, from press stories you see where some of the youth are now having to go to subsistance agriculture because they can't find any sustenance within the major urban areas. now i don't think america's going to become greece but i don't know. i don't want -- >> entitlements, even simpson-bowles lays out this proposal to raise the retirement age by a year. another 30 or 40 years down the road, and that's something that's -- in washington. it's something that none of us would be dealing with. >> i just want to know how we cut it in the next two years. i want it cut now. >> listen, i would be happy to roll -- let's just start out by rolling back the budget to where
it was before barack obama took office. i mean we've had a 20% increase in federal spending, when now all of a sudden apparently gdp growth of 1.5% to 2% seems to be the new norm. again, that math doesn't work. it doesn't work. we can get rid of -- we can get rid of ballout funds. >> not for the 2%. but we're going to get a trillion each year. why would you vote for that. >> but the deficit is the symptom. it is spending that is the disease. you can't have -- again, the deficit -- >> you could have stopped it then. >> the deficit is -- the deficit is not the true problem. the true problem is spending. that's where the true problem is. and already the president is taking us from our historic norm of about 20% of gdp up to 24% and on the way to 40% over the course of the next generation. and that's why -- >> -- social security up right now. two years from now.
wouldn't it be the answer? >> we don't have to do it that way, jim. in practice, as you well know, you don't have to cut one penny of federal spending. what you have to do is bend the growth rate. you've got to live within your means. you've got to quit spending money you don't have. again, we think it is fair that current seniors stay with the program that they have. future seniors be given guaranteed coverage options, including traditional medicare. the math works. it's been certified by the congressional budget office. i would commend you to read it yet again, because it doesn't take 40 years to get the balance. and, and if you would enact our pro-growth tax measures, you know, any time that we have flattened the tax code, any time that we have cut capital gains tax, we've actually had more revenue because more economic growth. witness the '03 tax relief, witness the tax relief in the reagan era, you can go back to calvin coolidge and find it works. we can get pro-growth revenue.
but, again, the main point is, unless you deal with entitlement spending, which at one time the president was willing to admit, we just want to do it for those who are 55 and under. >> -- get -- >> we don't believe, nor do you have to dpoel with current seniors to get it done. >> can i ask you this? there's a story on the front page of "the wall street journal" today suggesting that house speaker boehner has done a lot to try and bring his party a little more in the line. some of the problems, they lay out this idea of the unruly freshmen elected in 2010. he's done things both from the carrot and stick perspective. he's removed tea party members from key plum assignments. does how speaker boehner have your full support in whatever he negotiates? whatever deal he negotiates with the president? >> well, you can only have one person negotiate an agreement. and so we back the speaker. i would hope 99% to 100% of the members of our conference would back the speaker. but in my hip pocket, since my
voting card, with my picture on it, like every other member, i reserve the right to see what the final agreement is. but i have confidence of what the speaker wants to do, and that is to ensure, again, that we're able to create more jobs through pro-growth tax reform, and that ultimately, we -- looking at your button, rise above. rise above the stale politics in dealing with your entitlement spending that is ultimately going to drive america bankrupt. >> so does that mean you would agree to something like maybe a slightly higher marginal tax rate on the upper 2% if you feel like you are getting entitlements and spending cuts down the road that you think are worth that tradeoff? >> well, i don't know what i can do to stop it. i'm going to try to stop it. again, this was written into current law over a decade ago. that the tax relief is going to expire. so i don't know what i can do to stop that. and again, elections do have consequences. but, you know what? the american people, not only did they re-elect a president, but they re-elected a republican
house. so we have our own mandate, as well. but, you know, i was chairman of the less than super super committee, i was willing to put revenue on the table and one of the items i was willing to put it on the table for, jim, to your point, is to have a gradual increase in the retirement age to help bend the cost curve, again to save these programs for my 10-year-old daughter and my 9-year-old son. and sustain them for my parents who are in their 80s. i've been willing to do that. but again, we're not going to have any kind of bait and switch. what good does it do historically, any time republicans agree to some increase in tax revenue, you know, it's the revenue today, it's somehow the spending reductions never quite manifest themselves. you know, i guess i'm dating myself. also a little bit like the old cartoon popeye where wimpy says if you'll buy me a hamburger today i'll gladly repay you next tuesday. >> the immediate cuts that go with the immediate tax -- seems right. >> go take a look at our budget.
>> next two years. >> chairman hensarling we want to thank you very much for your time today. >> thanks for having me. >> okay. our mission critical rise above d.c. coverage continues all day long. come back in 30 minutes we're going to sit down with wisconsin senator ron johnson and talk for the next hour, grover norquist, old buddy from college joins us. will his tax pledge hinder a deal on the fiscal cliff? he rises above? where is that rising above? >> that's true. there are some people who say you got to stick with your convictions, others -- >> stick around. let's bring joe and andrew back into this. guys you've been listening to the conversations this morning. your take away? are we closer, further away? you hearing things you like? >> further away. >> further away. i've decided, becky and jim, that probably the best way to do it, i'm in howard dean's camp, why wouldn't the president go over the cliff and then introduce legislation lowering the rates on 98%? and if the republicans don't vote for that he gets the tax
cutting mantel and i don't see how they would vote against that? >> so cynical. >> but so true. >> why is that cynical? >> you know, because -- because i think it's crazy that that's the way things get done in washington, and we will explain that to the public. that, yes -- >> the president, we'd be back to -- there'd be no ifs, ands or buts. he would get exactly what he wanted. then you could talk about what kind of legislation to pass with capital gains, dividends, the lower 98%. all the things you need to do. and -- >> but for everybody to -- to do that, to say we have to go over this fiscal cliff -- >> we don't have to -- >> in order so that everybody -- >> you could have legislation ready to introduce that week. >> congressman hensarling, before you go, something like that, would -- i mean i hear this from both sides, that if we just go over the president would introduce this legislation to lower rates, republicans who have signed grover norquist's pledge would be able to go along with that and say this is what we did. i didn't vote to raise taxes, i
voted to lower taxes. is that the most likely scenario? >> makes sense? >> i'm not a las vegas bookie so i'm not going to say what is most likely scenario. i don't know and my crystal ball is a little fuzzy. again all this talk of taxes is marginally irrelevant. you give the president all of the tax increases that he has requested it's roughly about 23% of his ten-year spending budget. even 1.6 trillion. at most is maybe, 22%, 23%. the additional -- >> but going over that cliff, that's real money. and by the way, that's not that revenue thing. that's the actual spend side that republicans like so much. >> you've got to -- >> a reasonable proposal. >> again, until we start talking about dealing with the long-term insolvency of our entitlement programs, you know, all this talk about taxes is just a point of diversion. at some point -- >> -- the taxes.
>> at some point the american people need to understand exactly how much their government is costing. they have to understand that programs that they're relying on today are not going to be around tomorrow. and so every single minute we spent talking about 3% of the problem is where we're spending time ignoring 97% of the problem. and every single day i just saw where the president, where the president says, well now the modest medicaid reforms, they're off the table, we've already had others tell us that social security for future generations is off the table. yeah, it's off the table. my children are going to see an automatic 22% benefit cut, you know. my friends on the democratic side of the aisle, i could talk about fairness, what's fair about cutting my children's social security 22%, which is their plan? again to deal with the 97% of the problem you've got to deal with entitlement spending, grandfather the grandparents but bend the cost curve today. we can get good retirement
security and health care at cost that doesn't bankrupt our children. but if we act today. otherwise, that goes to christmas yet to come is greece. >> chairman hensarling, thank you very much. jim, a reasonable proposal for the fiscal cliff? modest proposal. i've read things like that before. >> i'm talking about the -- look, did i mention once the tax increase? >> no. >> i'm going for quick spending cuts. because we just -- we agreed to give the rich people that deal two years ago, we added a trillion and then another trillion. i don't know why a republican ever agreed to that. i'm trying to figure out -- >> it wasn't -- >> who the heck -- >> wasn't because of the 2%. >> because it kept -- >> it kept the deal from happening. >> by given the -- added 2 trillion to the deficit. i hated that. try to find out how to cut that deficit now. not the future. >> we've got a lot more 20 come this morning. >> thanks, guys. crazy conversation. we'll see where it goes. comments, questions about
anything you see on "squawk," tweet us @squawkcnbc. coming up, holiday central. the ceo of phillips v-van heuse. >> who? phillips-van heusen joining us on the set. he's dressed head to toe in calvin klein and he's here with one of his company's largest shareholders cliff robins. i don't know if he's dressed in calvin klein. we'll find out.
wow. that happens a lot, doesn't it? we're in the middle of something and then the show gets -- anyway. some in corporate america might be sitting on cash in fear and uncertainty. not our next guest. chief executive officer of hedge fund group. chairman and ceo of the pbh group. >> used to be phillips-van heusen. >> but no longer. >> they changed it for me and others. >> blue harbor is leading shareholder. first of all it's just nice to see you guys. you're friends. you're not arguing about anything. you like what's happening. >> i love it. manny is a huge business builder, and thrilled to always be investing with him. right now we're lead stockholder. that's a real home run, manny. congratulations and thank you. >> of course he says thank you. huge premium. >> it's a huge premium.
>> it is a huge premium. but it's a great deal. and manny, i'm amazed what you've done, how you've built this company. when we started out investing with you, five, six years ago, it was basically a u.s. business. just bought calvin, then you bought tommy. now you bought warnerco. now you're part of a big powerhouse with almost half your business outside the u.s. tell us about the warnerco deal, why you did it and what's happened? >> the key reason for the warnerco transaction was to bring the calvin klein brand back, reunite the brand. we now have control with the underwear business worldwide which represents about 75%. so that was the driving force. it really gives us platforms in asia, and south america, which we really don't have now. really makes us a global powerhouse. >> you know, is the underwear business and the jeans business a bigger business than the suit business for example? >> yes. the underwear business worldwide is over a billion dollars in sales and jeans business is
close to $2 billion. so those are the two largest categories followed by fragrance which is about a billion and a half dollars. >> when you did the tommy deal you knocked the cover off the ball. you put some numbers out. you delevered the company quickly. now you're back doing the warnerco deal. is this going to be as transformational? >> i think in some ways it's going to be more transformational. it really opens up two key markets for us to operate directly. today we are operating on joint ventures and licensing arrangements. so in asia, china specifically, ind india, and in latin america with brazil, you know, really opening up the developing economies, where warnaco, in those two areas approaching 20%. >> phillips-van heusen, to be able to transform it from what we think of when we think of phillips-van heusen to what it is now, that's what needed -- so many other brands could take a
lessen from the way you've maneuvered in that. >> heritage businesses, izod, are still north american businesses, think about it. but think about where we from a geography point of view just ten years ago 99% of revenues were being done in north america. and today, over 50% of the profit -- of the revenues are outside north america and over 60% of the profits. >> okay. >> thank you. >> thank you. >> this was great. coming up the engine of economic growth, the closely watched survey of small business sentiment, and investing plants. ♪ [ engine revs ] ♪ [ male announcer ] oh what fun it is to ride. get the mercedes-benz on your wish list
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we may have seen a slight uptick in job creation for the month of november but the nfib tells us that small business hiring is still being stunted by the election results, and the effects of superstorm sandy. joining us with the latest on that, bill dunkleberg, chief economist at the national federation of independent business. bill, in reading your findings, am i wrong to say you found that it really wasn't sandy, that it was the election results, and if that's true, how do we give --
can we give the president the benefit of the doubt in that maybe it just, the election results means that the cliff is front and center? the cliff would not have been front and center with romney because he would have probably just extended all the bush tax cuts, i think. so is it the election result that's causing this? and is it the president himself? or the gridlock that it's causing with republicans? >> i think you basically have it right. we spent billions of dollars and then woke up the day after the election and nothing had changed and i think that's the issue. because the management team couldn't reach agreement on how to deal with the problem that was coming up, so we were stuck with the same kind of management team so people thought oh, my gosh, how are we going to solve this problem? you know, with the same people here who couldn't solve it before. so, you're right, it's the fiscal cliff, and you know, if one side had really been more dominant in the election, one way or the other, then bee would have had a clearer sense that some kind of an answer would be reached. and -- >> wait a minute -- wait a
minute. hold on. wait a minute. let's say that the democrats took over the house and widened their lead in the senate and elected president obama. we'd have certainty. would small businesses then -- >> exactly. >> they would have been happy that maybe we'd have more entitlements, larger government, higher taxes, as long as they knew what was happening? that would have been a positive for small businesses? wore that would have also been a negative? >> i think that probably would have been a negative, too. >> good point. >> somebody was going to be disappointed in this election. >> that's what i -- >> is it the actual merits of what's going on? or is it the certainty of gridlock? >> well, i think it's the gridlock that we can't get any answers. so if i'm trying to calculate the aftertax return on a new hire or a new investment in equipment, you know, what tax rates am i going to use, what's -- >> they're going to be higher. >> yeah, there's no chance, of course, that obama care will be undone now. for that you do have some certainty on that. but you still don't know exactly what the rates are going to look like. so i think the concern is that
nothing will get done, and we'll go into a recession, so if you look at the reason the -- i mean this is the tenth worst reading on the index we've had in 37 years. i think the reason it went down is because people look out into the next six months and go, you know, we're in trouble here. >> are any of the small businesses that you're talking about saying what republicans say they're saying, and that is they're in the 2%? they pay those taxes like that? pore what the democrats say, that none of the real small businesses, it's only 2%. are any of them worried about the higher taxes that are going to happen on the top end? >> well, i'm sure they are. we did a special study with offering 75 different problems for the owners to identify as their top problems. of course liezing health care costs is number one. uncertainty about government policy was number two and number four. energy was three. six, seven and eight was all about taxes, and the loss of capital, the growth of business,
and tax code complexity. i mean, those are -- those are important issues for the small businesses out there. no question about it. like to know something about what's going on. >> okay. so we go -- let's say that this is resolved, that what we have facing us, some way or another, do you expect that it will come off of these lows that you're seeing? >> well, i think that we'll have to see how the economy evolves. since 80% of the declines in the index was about expectations for business conditions, and poor expectations for real growth, and your sales, that means that the small businesses are going to sit tight. they don't expect more customers so they're not going to hire, and that, of course, showed up. all the other components of the index stayed at recession levels. here we are at this very, very low level of optimism, consumer optimism tanked along with the owner optimism. and a lot of them are going to be affected. i mean, the president said only 3% of small businesses are affected. but, we all kind of agree they're about a million small business owners that would be in
the $250,000 and up group. but in his denominator he's got the number of people who file a schedule-c, which is 30 million. in my denominator i have 6 million employer firms, that's the key. so that's like 15% or 16%, 17% of the small business owners who will be impacted by higher tax rates. so they'll have to incorporate that in their calculations about hiring and investing. plans to invest in the equipment and so on fell three points in this survey to another recession type number. so it's not good. >> okay. bill dunkleberg, yeah, it's not good. not good. i don't know -- >> sandy didn't do it. >> i don't know how to make it any better. all right, time heals all wounds. hopefully next time we'll hear some better news from you. >> i hope so, too. thanks, joe, thanks andrew. >> maybe we'll get some better news right now. steve liesman joins us with the results there cnbc's latest fed survey. steve? can you make it any better? >> i don't know about that.
what we have, andrew, is overwhelming support from our -- or expectation from our respondents, 48 respondents, economists, wall street strategists, and analysts, that the fed will replace twist with outright asset purchases. disagreement on how they'll do it and increasing concern about all these purchases and the effect on the market. let's start off with the disagreement about how they're going to do it. we asked people, will the fed purchase only treasuries when it replaces operation twist? or will it purchase treasuries and mortgages? you can see that they're about split on this. unclear what chairman bernanke is going to announce tomorrow. now, how about how much qe? they're pretty united on that. this is what we call distributions. the percentage of respondents answering which number. you can see pretty much the biggest priority, 35% at $85 billion. so that's $40 billion that they're doing already and then replacing twist would be $45 billion. some disagreement along the way. the plurality there is $85
billion. what does that mean for next year? a whole lot of asset purchases. here's the distribution chart again on the total purchases for next year, and they're looking for a trillion or more. in fact, if you put together the trillion or greater, it's 35% of the group looking for a trillion dollars of asset purchases. remember, the fed owns -- the fed balance sheet is $2.8 trillion. that's a big jump in the total. what about whether or not additional quantitative easing will disrupt the market. market pricing. is the fed taking too much out? big change here. back in september when we asked this, only 43% said yes. 59%, 60% are concerned now, that the fed is buying so much stuff that it's going to disrupt pricing in the industry. 52% say no. and 13% don't know. so a lot of uncertainty, and concern. one other thing, now we asked this for the first time, we're going to be monitoring this over the next several months. a lot of questions about whether the fed uses economic targets. we asked people what the economic targets should be. when will the -- what
unemployment rate and what inflation rate will prompt the federal reserve to stop or halt its quantitative easing purchases? this is the average. 6.5% unemployment. and a pretty high number, 3.4%, on inflation. so if the fed were going to pick economic targets, those are the ones where they average out for our market responses. back at 8:15, guys, with their views on the fiscal cliff and the likelihood of a recession. you can see the full story, the full results on cnbc.com. andrew, the fiscal cliff results are not going to be very happy either. >> sounds not so happy. i was going to ask, as an investor what do you make of that? do you agree with those results? >> i think the difficult time to analyze those results, the biggest issue facing the market today is what's happening with the fiscal cliff and when that will be resolved. that's what everyone's waiting on. >> would you do anything differently as a result? >> i'm not. because we're long-term investors. we're looking at things from the bottom up. looking at our companies and how we can create values.
from blue harbor's standpoint we're not changing our motive of business. but the general public is certainly waiting to watch. >> steve the unemployment number, 0.5%. >> it's lower than i would have thought. because remember it was sort of a 7-3 thing from charlie evans from the chicago fed. he said 7% and 3%. this is the average. some people think the fed should do it a little lower. some people a little higher. what i'm interested in is how this will change over time. how people's perceptions of what the right unemployment rate is for the fed. >> meaning as a policy it will keep getting lower? >> it could go either way. it's unclear how that average is going to work. but that's something i think that the fed chairman is going to be particularly interested in, what the margeate perception is. but i'm interested in whether or not you think $85 billion is the right number. is it too much. especially your concern about the market disruption. the fed is very concerned about this. it keeps studying this effect. it keeps saying no it won't. but now it's going to do another trillion dollars. and there's concern in the market about this. >> there is. i mean i think that i still feel like the number one issue, we'll
talk about this later today, facing the market is, and what everyone's focussed on now, is the fiscal cliff. the uncertainty that we're all living with. this is the big issue. >> okay, cliff, steve, thank you for this. we're going to see you again. 8:15. >> absolutely. >> coming up, republican senator ron johnson on the progress of the fiscal cliff negotiations and the compromise. top of the hour, crime jameser picks up where he left off with grover norquist after their recent dust up on "meet the press." that's at 8:00 a.m. eastern. ty. and cut! very good. people are always asking me how we make these geico adverts. so we're taking you behind the scenes. this coffee cup, for example, is computer animated. it's not real. geico's customer satisfaction is quite real though. this computer-animated coffee tastes dreadful. geico. 15 minutes could save you 15 % or more on car insurance. someone get me a latte will ya, please?
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mercedes-benz dealer. i'm raul in princeton new jersey. my brother and i have been in business 30 years. we employ 200 people between the three restaurants and the bakery that are immediately impacted by how business suffers. not to mention, their gratuities. it's all percentage of sales. we are concerned about the fiscal cliff, because of taxes. we are saving, absolutely. we're holding on any types of expansion. in an economy that's like desperate for jobs, that shouldn't be the case. there's really no politics when you have to balance the budget like we do in business every day. it's the same here. i would like lawmakers in
congress to compromise and make a settlement, avoid the fiscal cliff, and move on. >> welcome back to our sal mission critical rise above d.c. coverage. i'm jim cramer. becky quick. we're coming to you from capitol hill. and we're here encouraging lawmakers to rise above partisan politics and negotiate a deal to avoid the fiscal cliff. joining us now senator ron johnson, republican from wisconsin. thanks so much for coming. >> good morning. >> i'm getting worried here. because clock is ticking. should we allow a vacation without legislation? >> no, i'm happy to stay here until we get this thing fixed. understand how absurd this process is. we've done this with the debt ceiling. with the super committee. now we're back here again where we've got two people, and they're unelected staffs negotiating the financial future of america. i mean this is absolutely absurd. and why is that? it's because the democrats haven't shown us their plan. we have nothing to compromise with. listen, i'm happy to work with
anybody, who's willing to first acknowledge the problem. and then work with me in good faith to fix it. but i don't see that from the other side. i mean the house has passed two budgets, including proposals to save medicare. the democrats in the senate have not passed a budget in three years. they haven't voted for any plan whatsoever because they don't want their fingerprints on a plan to save this country. president obama's last two budgets have been voted on three times in congress, final vote tally 0 to 610. until i see a plan on the table -- >> the republicans get their way, you get through this fiscal cliff, let's say there is some sort of a deal, you're going to be right back in the same situation in six weeks talking about the deficit, the debt ceiling again. >> if republicans had their way, we would be spending $7 trillion less over the next ten years, that's the difference between the house budget and the president's budget. $7 trillion. we're always talking about minimum of $4 trillion. well the house budget has already done that. they've laid that -- put that template out there, because that's what a budget is, showing this is the most you can spend.
now take that information committees and start crafting the legislation under that fiscal constraint. that's the way the process ought to work. then you actually have elected officials debating back and forth in committees and committee markup, in the view of the american people, as opposed to behind closed doors, literally with unelected staff members trying to hammer all this stuff out in two or three weeks. it's an absurd process. >> okay, so we go over the cliff then. we get a recession. it was meant to create a recession. why did we get to the point where the republicans agreed must be so pro-business to lead to a situation where we know we're going to have a recession. why did you fight that hard? >> first of all, i wasn't here. temporary tax cuts -- temporary tax cuts are not wise. it sets up that level of uncertainty. the thing holding back this economy. i was in manufacturing for 31 years. business people want some level of certainty from the government. you have enough uncertainty in
business. business is hard, by the way. president obama thinks well these guys can pay it, they can afford it. listen, it is not easy to conceive of a product, and then produce that product at a cost that is lower than what you can get somebody to buy it for. that is hard. that's why most businesses fail. and now washington is going to increase the tax burden on small to medium sized businesses? now washington is continuing to increase the regulatory burden. that's -- the problem is the size of government. all of government's intrusion in our lives. all the rules and regulations. if you want to get this economy going, and i think you could get it going, reduce the government -- the federal government's influence on business people's lives, and on american's lives and we could get this economy moving forward. >> we cut the capital gains rate pretty low. i've started five businesses. some successful, some not successful. when they were not successful, government had nothing to do with it. a great idea where you work hard and this country works, why do we talk about the government's intervention? why don't we just talk about how good business can be, with or without the government? >> what has happened the last 30
years is we've gotten this regulatory environment, for example, president obama's own small business administration, the study they commissioned, costs $1.75 trillion per year to comply with. now, that's a number that is larger than all but eight economies in the world. that's the kind of burden we're putting on small business people. listen, i lived through business over those 30 years. i've talked to business people. talk to me, started their businesses back in the '70s and '80s and tell me, ron, there's no way i could start this business and grow it the way i did in the current regulatory environment. now what are we talking about? what is president obama's demand? let's increase taxes, tax rates, on the top 2%. which is, you know, there's a million small businesses, medium sized businesses, included in that figure. those are the successful ones. that, by the way, small to medium sized businesses are the engine not only of economic growth, job creation, but innovation. just take a look at what's happening. you have to look at the unintended consequences of these tax increases. what's happening right now with obama care and the 2.3% medical
vice tax. i sold into that industry. you have medical device manufacturers moving overseas, democratic senators going boy that wasn't such a good idea, let's not enact that 2.3% medical device tax and not only those primary manufacturers, cost jobs but all their suppliers. their, you know, number one and two-tear suppliers, they're not going to be able to supply those companies anymore. not in europe -- >> i know you are a man of principle. i know that you firmly believe this is the right path. if there is a deal that is carved out between boehner and the president, if they are able to reach some sort of an agreement, it may have things in it, or i know for a fact it will have things in it that you don't like. would you go along with something if it matches up with spending cuts you would like to see? >> in the republican primary debate when they asked that question, would you take a deal where there's one dollar of revenue for ten dollars of spending cuts. you know, if i knew those were structurally locked in, that we actually fix the problem. i'd take that deal. >> you're not going to get one
for ten. >> i know. it's a hypothetical. i have no idea. let's talk about growth real quick. a couple numbers. even with the miserable growth we've experienced from 2009 to 2012, you know how much revenue has increased to the federal government per year? $344 billion. if we just return to a normal economy, where we have revenue generation, which is average, at 18.5%, that would add another $434 billion per year. add those up that's more than $750 billion and president obama's punish success scheme would raise somewhere between 74 and 35 it's 10% -- here's the problem -- >> bring the soldiers back from korea. what are they doing there? how about japan? how do we cut the defense budget now? >> jim, i'm not disagreeing with you. >> what's the -- >> first audit of the defense firms we don't even know where the money is being spent. i'm not disagreeing with you on defense. you want to really attack what's going to be an explosion in costs, it's brom ma care.
obama care is so vastly or grocery underestimated in terms of costs. i mean currently, the current budget window is $1.7 billion. when true spending kicks in $2.5 and that assumes only 1 million employees lose employee sponsored care, get dumped in highly subsidized -- >> some -- >> people have their head in the sand on that one. that will add trillions of dollars to our deficit and nobody wants to talk about it. nobody's talking about medicare anymore. because the democrats have taken that off the table. i'm asking the democrats, show us your plan. then i know what i'm going to compromise with. >> but in theory there is a plan that would exist that you would say, okay, i'm not going to go along with the pledge that i signed, this is a plan that i think is better for the nation and i'll do it? >> i need to see structural reform in spending. so i know we have got things locked in but becky i haven't -- >> -- cliff -- >> we got -- negotiate with myself?
>> you're against the recession. >> i've done a lot of negotiating in my life. i know when somebody is sitting across that table negotiating in good faith and when somebody is just moving the poles. where has this president done? >> i'm a professional football plan i don't see him going. i'd just like to know how to avoid the recession. >> you should extend all the current tax rates and start working toward pro-growth tax reform like simpson-bowles is talking about. lower the top marginal tax rate because that is the incentivizing nature of the tax code. i'm happy to get rid of special deals. i didn't have government affairs office lobbying me in congress. i'd be happy to get rid of all deductions, lower the tax rate. and here's something i'm really concerned about. if we increase taxes on the top 2%, you're going to be increasing taxes on sub chapter sllcs up to 40% with the medicare tax. the next shoe that will drop is corporations, the large c-corps are going to be going come on you've got to give us, going from 35 to 20 now you've got small medium businesses the
innovators competing at a 40% tax rate -- >> feel like going to another country i'm at 48%, sir. i think a lot of people are like me. >> so what we need to do, the minimum if we're going to increase taxes on the top 2%, i sure hope we decouple business income from that. i'd like to couple sub chapter s and lc business tax with c-corps so we don't have that disparity. >> we'll have to have back. this sounds like a much longer conversation. senator, thank you very much. guys we'll send it back to you in the studio. >> okay, thanks. up next, we've got more from our guest host cliff robinson. still ahead, more from becky and jim in d.c. they're going to talk taxes with grover norquist at the top of the hour. >> above the past month, the u.s. national debt has grown at an average rate of 9.5 billion dollars per day. you won't take my life.
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earlier of $15 billion, but in an e-mail that just went out from the ceo of that company saying it's going to be $22 billion. >> and you see the liberal press. they hate him. >> hero. >> hero or goat? >> he's a hero. i give him credit. i give him a lot of credit. i give him whole hearted credit. >> coming up, big lineup at 8:00, grover norquist will join us to talk taxes and the fiscal cliff. [ male announcer ] at scottrade,
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>> we'll ask the tough questions. >> what are you going to do? >> where is the compromise? >> mission critical, rise above d.c. all day today. >> congress, get a deal done. >> america, we're on the edge of the fiscal cliff. billions are at stake. and your money hangs in the balance. while washington quarrels with itself, time is slipping away. the only solution for our government to put differences aside, and put real compromise on the table. rise beyond disparity. rise past adversity. rise above. this is a cnbc special report, mission critical, rise above d.c. >> welcome back, everyone. our special mission critical rise above d.c. coverage continues. i'm becky quick along with jim cramer. we are live from capitol hill today, encouraging lawmakers to try and rise above gridlock and reach a deal on the fiscal cliff. here's what we know at this point. there are private, but quiet,
talks going on between the obama administration and house speaker boehner's office. those talks are continuing. but again we have just 20 days left. we were just joined by senator ron johnson from wisconsin who said that we have to focus on business tax reform. and in the last hour we had texas congressman jeb hensarling who added no republican wants to raise taxes, but hensarling says he doesn't know how we can have some sort of a hike, how we can avoid that situation. taxes, of course, are one of the key sticking points to a deal. and joining us right now is grover norquist. he is president of americans for tax reform. and grover, thank you very much for being here. >> absolutely. good to be with you. jim. >> we know we are at this countdown. it's a pretty tight time line before we see if we're going to go over the fiscal cliff or not. and i've spoken to a lot of republicans, elected officials who have signed your pledge, who say maybe they signed it a decade, maybe even longer ago. some of them think the situation has changed. is it wrong for them to vote with their conscience if they think that this is the best thing for the united states, to
vote for a compromise that would avoid the fiscal cliff? >> well, two things. the fiscal cliff, of course, is a complete made-up deadline. it can be moved two weeks or three weeks. nobody should sign a bad deal, not obama, not boehner, because of an imaginary deadline. it can be moved weeks out. months out. two years ago. obama personally moved it out two years. because he didn't want to raise taxes and damage the economy. because he said the economy was weak. the economy is not strong now. so the argument to raise taxes now is not any better than it was two years ago. i think there's a real danger that we're going to end up with some damaging tax increases and nothing to show for it. >> the economy may or may not be stronger but we are also staring down a situation where we have seen a $5 trillion deficit that's built up over the last four years. there are some republicans who think, yes, we are going to have to do something, spending cuts is the biggest part of that, but they also think that you're going to have to raise revenue. again, do you think it's a bad thing if they vote with their conscience, even if it's
something that goes against your pledge? >> it's not my pledge. it's the pledge that congressmen and senators take to their voters when they got elected. >> sometimes that's changed though. >> okay but raising taxes is always bad for the economy. that doesn't change. raising taxes is what politicians do instead of reforming government. i mean the reason we haven't reformed the entitlements, the reason we haven't reined in spending, is the politicians go oh, we'll just raise taxes and backfill. those states which don't raise taxes and do reform government are doing better than california and illinois, which raised taxes in order to not reform their pension system, and their public employee compensation. not only do they not reform them, they increase them whenever they get a tax increase. so, tax increases are not part of reform. they're what politicians do instead of reform. and you can look at it through national history. but it's easier to see in the 50 states. which are the states that don't raise taxes? they're the ones who do reform government. >> we have to be careful because
the most recent data show 300,000 new jobs created in california. i agree the tax scheme is crazy out there. i have no idea how they created all those jobs. but they did. here's what i'm concerned about. which is worse? the number of jobs that will be lost, because the president -- let's say he doesn't compromise on this revenue. the number of jobs being lost by the president's intransigence versus the number of jobs that could be created if we actually did not raise taxes. >> look, nfib and the small business groups say that the tax increases the president wants specifically would cost 700,000 jobs in the small business community. >> but if he doesn't compromise, if he doesn't rise above and say cut the taxes or give -- >> then he would have even bigger tax increases -- >> i'm just saying that the problem is, that if we don't rise above, grover, we are going to lose a million jobs in defense. we're definitely going to lose 2 million. all the data show that. so what do we do if the president doesn't budge and the republicans don't budge?
what happens? >> well, i like this rise above strategy. and i think the best way to rise above washington is to let the american people in. i'm very concerned that they're now having secret meetings. okay. we're in the u.s. senate. the senate hasn't passed a budget in three, four years. harry reid isn't even at the table and they're having these discussions. but he has a veto for anything that happens. a secret veto. but he's not in the room. the senate got elected, got itself re-elected by not having any votes over the last couple of years. i think if we had c-span, and cnbc cameras in the negotiations, then people could see what the republicans are doing, and the democrats are doing. let's remember what the president's budget is. i bet many of your viewers are unaware, because the establishment press hasn't covered what he's done. he saves a trillion dollars by not occupying iraq and afghanistan for the next ten years. okay. i could save a lot of money by not continuing the war of 1812. but a trillion dollars of the
spending cuts are completely phony, because they're from something we already stopped doing. there's another trillion dollars that was agreed to and is in law from the budget control act. he wants to sell you that horse again. he wants to add another savings like that is this trillion. >> although the republicans -- jeb hensarling even said when jim pushed him on the idea of what would you cut, would you cut denens? he said we've already cut defense. there's double cutting on both sides. >> why don't we cut foreign aid? why don't we cut -- we always talk about medicare and social security. we give a lot of money to farmers. we have big foreign aid. a lot of countries we're probably thinking you don't want to give it to. >> i think we should eliminate foreign aid with one exception, and that is we should share with people that understanding of how we did it. fernando desoto who's been out in various countries getting property rights established so that people who live on land -- most of the people in egypt live on land they don't own. live in homes that they don't technically own. they can't sell them.
they can't go away for a long period of time. maybe a quarter of it is on land that's unconstitutional to live on. >> so cut that. >> but don't give them cash. but do explain to them, that the property rights are kind of important if you want to build a free society. >> how about negotiating with these drug companies? you know, the republicans gave in on this medicare part-d. they made it so the government does not negotiate with merck and pfizer. shouldn't that be scrapped immediately? the government really come after those guys to get breaks we all know that our hmos -- >> you're talking about when they created the department -- >> i'm just saying negotiate with the pharmacies. wouldn't that be a good way to save some money? >> that was one of the few entitlements i'm not sure i'm crazy about creating another entitlement that came in under budget because it does allow competition by citizens. >> it really crushed those drug companies. why wouldn't you want that? >> when the government's the only purchaser, that's not competition. that's waging price controls and that hasn't worked well in canada or europe when you're trying to develop new drugs. so i do worry a little bit if
the government's the only purchas purchaser, i'd rather have 300 million americans making these decisions, they just -- >> you know -- >> trying to find some ways to save money. i ask a lot of these guys, please tell me, maybe take the troops out of korea. maybe cut the j-35, trying to pin some people down. what can we do in the next couple years, other than the cliff, just to really do some cutting in that. all that spending. >> there's a list of $700 billion in savings, a number of groups have put together in d.c., and first of all, you should sell off all the -- military owns that they're sitting on. that's tens of billions of dollars. >> cut -- >> but that goes out into the free market and people will do interesting things from that and the benefits from that you don't even know right now. we have something in this town called the deep caucus which is congressmen and senators determined not to privatize weapons depots. half are privatized they cost less. half are run by government
bureaucrats, they cost significantly more. there's a lobby the depot caucus to not save that money. we should do what other base closures -- >> those are security concerns though, right? >> half of them -- >> -- not government security. >> half of them are already done privately and they don't have any bigger problems than the government does. really who do you think would keep a better eye, the contract or the guys who go, oops, we missed. >> how about the farmers? farmers is pretty good business. >> farmers, two things. >> you're paying -- >> you stop doing price controls. you stop paying them to tell them how to grow. you want to be a farmer, here's what you do. there are a lot of things you could do for the farmers, the death tax is devastating to keeping a farm together generation after generation. reducing the death tax would be helpful. giving the money is not helpful. and so those are savings to be made. there's an awful lot of stuff this government does that it doesn't do well. and we need to -- if you can raise taxes, you never have those conversations about
spending. the only time either in the states, or in a city, detroit, you can't have more money. oh, we may have to reform. they may actually reform detroit. finally. but as long as you're bailing things out, they don't get reform. and the same thing is true in the corporate world. you're throwing money at them, cash, other people's cash, they're not going to reform. >> there's an article on the front page of "the wall street journal" today that lays out the difficult time that house speaker boehner has had in trying to control his party. they call them the unruly freshmen class of 2010. many of them are tea party members. many of them are close to you. boehner has moved forward with trying to reward some members, to curry favor and other situations over the last couple of weeks he has removed three tea party members from key committees, because they were not voting in line. he's flexing his muscle when it comes to the leadership. some of these people are very close to you. how do you see his leadership right now? >> well, i'm a strong supporter of boehner. i think he's been quite a good leader.
he helped keep all the republicans together and they voted against the wasteful stimulus program in 2009. there were 40 republicans we worried about. those weren't the unruly freshmen? $800 billion. >> you got them back in line. they're going to lose, right? you got people ready to run against them. >> boehner kept 40 appropriators away from the table with $800 billion in cash. if republicans had passed votes for the stimulus package they could have walked away with some of the goodies. he kept discipline from guys who wanted to spend more money. he also needs to work on discipline, because a couple years ago, that unruly freshman class interfered with the strategy boehner had that was working. which was, here's we're going to give the president >> a year and a half ago in summer of 2011 when they were almost on the verge of reaching a deal? >> no, no. boehner played that one actually fairly well too.
but i'm thinking about immediately in early 2011, when they were saying to the president, here's your continuing resolution. here's two weeks or a month's worth of additional spending, that you have to cut $4 billion. and so you're getting three yards and a cloud of dust on spending and some of the tea partiers go this is boring. let's have a big fight now. >> but, grover, if there wasn't such an uprising back in the summer of 2011, they were on the verge of signing this deal, they got the fiscal cliff out of it, if it wasn't such an uprising then, if boehner had had more confidence to cut that deal with the president he would have had a much better deal from your perspective than you're going to have this time around. >> actually i read that differently. i think the president misread his power because he heard a republican of republican senators talking about raising trillions in taxes. >> from the gang of eight. >> gang of six. >> right. >> and they were talking about tax increases. nobody else was. not other senators, nobody in the house. not boehner. and the president went back and tried to jam boehner, because he thought there was division in the ranks. so one of the challenges that
boehner or mitch mcconnell has is you need to be one voice as the president's one voice but you have a lot of members. >> what about hedge funds? don't raise the rates, just make them pay the rates. make them pay ordinary income. i'm always surprised, you convert ordinary income rates to capital gains, that's not what people do. just pay ordinary, right? you agree to that. they don't have to raise the rates. >> did you readed article that harvard is the hedge fund that has the university on the side? >> i don't know. >> $27 billion hedge fund. >> you agree with me they ought to switch the rate with ordinary income. >> i'm not -- look, it's a tax increase but you can offset it by tax cuts elsewhere. you could do tax reform in such a way that long as it doesn't net money to the government. if the government sees additional cash they go, oh, and they drop all the reform plans they had, they take the new money and they spent it. >> but there are going to be additional revenue. republicans, including boehner himself, have said there will be new revenues that come, whether it's higher tax rates or not.
>> you could certainly get revenue from economic growth. >> that's not the plan now. >> actually it is the plan they've laid out. may not be the plan for the president -- >> -- president's plan. >> but give you some sense of the numbers, you grow 4% a year, reagan's numbers, versus 2% a year, obama's numbers, you net $5 trillion in additional revenue over a decade. that's how powerful growth is in terms of revenue. >> but $800 billion in additional revenue is boehner's plan. i mean that's additional revenue without raising tax rates. >> no but can you get that through economic growth. that's what he offered the last time when the president misunderstood it which caused the car crash. but what you do get from the president, who wants to raise tax rates that will slow growth from what it is otherwise. so you're not going to raise as much money as they hope to. you never do when you raise rates. >> grover, thank you very much for joining us. >> thank you. good to be with you. >> all right. okay.
plenty more to come from capitol hill. it's kind of exciting. in 30 minutes, senator bob corker and kent conrad. and at 9:00 eastern, representative scott garrett and sander levin. remember "squawk on the street." >> that's right. "squawk on the street" we have a lot to come, as well. the two senators we're talking with next, two members of the gang of eight now. we'll talk to them. guys we'll send it back to you right now. >> great. thanks, guys. appreciate that. we are now, though, going to flip it over to phil lebeau who is in new york and he's got breaking news. >> as expected we knew that delta was in negotiations to buy 49% stake in virgin atlantic. the deal has been completed. the price is $360 million for that delta will increase its access to heathrow. that's really the key here. 31 daily nonstop flights. that's all part of what goes between the uk and north america for virgin atlantic. the brand remains, guys. make that clear here. the virgin atlantic brand does not go away. what changes is that delta has a
49% stake in the company. there's going to be a press conference later this morning here in new york. we're going to be talking with delta ceo richard anderson, and "squawk on the street" a little later on this morning. but this is a big deal in terms of what's happening with the airlines, and that international consolidation that we've all been expecting. guys, back to you. >> before you go, real quick. how much is this going to really impact delta, singapore air, which had this stake, was unhappy ultimately, because they didn't have the control that they really needed. or thought that they needed. >> i think richard anderson believes he will have the control. also singapore airlines, many believe that it did not utilize the access to heathrow as effectively as delta will be able to in terms of flights between north america, and heathrow. so we'll have to see whether or not richard anderson is able to do what singapore airlines could not do over the last several years. but richard anderson clearly believes they can make some serious money here increasing that access to the uk market. >> you followed it for a long
time, phil, don't you, like when you see richard anderson, do you think i'll bet you he makes it work? isn't that sort of the opinion we have of him? >> there's no doubt among all the airline ceos, he's probably the one that has done the most consistent and effective job in 2er78s of growing revenue, growing profits and this is a big step for delta to say, listen, we wanted to get access to this before other airlines, our competitors had a shot at that heathrow. remember this is all about the slots at heathrow. heathrow is the ground jewel in the airline industry in terms of profitability. if you can increase your slots and increase the number of flights going there, then you've got a greater shot at increasing your profits. >> all right. richard dean anderson -- remember. he could rig up anything. anything he needed to do, he could make it out of a couple of wires -- >> and i love virgin air. so it's good. by the way, they accept american express membership miles. >> why are you on virgin air if you're a mile high club guy? >> coming up, more from
washington, we're going to hear from democratic senator kent conrad and republican senator bob corker on the debt negotiations at 8:30 a.m. eastern. first, steve liesman's going to be bringing us more of c innocence's latest survey, fed survey when we return. tdd#: 1-800-345-2550 when i'm trading, i'm so into it, tdd#: 1-800-345-2550 hours can go by before i realize tdd#: 1-800-345-2550 that i haven't even looked away from my screen. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 that kind of focus... tdd#: 1-800-345-2550 that's what i have when i trade.
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welcome back to "squawk" this morning. u.s. equity futures at this hour. dow looks like it's opening nicely. 53 points higher if we opened up right about now. let's get you over to steve liesman with more on from exclusive -- >> you definitely read that? >> no, you can read it. >> when you guys are done figuring that out let me know. >> you guys -- >> are you guys quite done? >> here's what -- turn your mike off, joe. here's what we're going to give you now results on the fiscal cliff. and what are 48 respondents from wall street, economists, strategists, analysts are saying about the fiscal cliff. first thing is, you'll note, possibility of recession is now at a 13-month high. ticking up to 28.5%. we were at the low in march 19.1 and we haven't been higher since
36.1% in august of 2011. i guess that was the previous deficit debate. now, here's what kevin gibbous is saying about the fiscal cliff. it's edged its way to the head of the class. if it could be avoided economic growth in terms of just being hard versus nearly impossible we'll have more on that in just a second. does wall street think we're going over the cliff? no. 41% saying we'll -- 41% saying yes we'll go over, 42% say no. look at this 13% who don't know. you want to know about uncertainty in the economy. i would add the yes that 41% and the don't know 13%, i would get 54% think we're going over the cliff or they're not sure. we talk about uncertainty in the economy, that's showing it right there. the u.s. economy can grow at 3% to 3.5% in short order if the politicians could get the budget right. so there's the upside. the downside here, too, we asked
about the fiscal cliff impact. the blue is 2013. the red is 2014. 44% say the impact would be negative two and negative four. what's interesting about this when you look at the results, as it goes not just in 13 the impact is 1.6% in 2013. it remains more than a half a point in 2014. so it lingers on. but does wall street think it will linger on? last thing i want to show you here is how long a cliff dive and you can see just lasts for a few days or weeks. only 28% for a few months and a very small percentage say most of 2013. that's the good news, wall street thinks if it happens, it happens short. back at 10:00 for results on what economists are expecting four qe and the market. check out more of the survey at cnbc.com. joe and andrew, back to you. >> your turn. >> no//
>> please. >> no, no, most. >> i insist. >> straighten you guys out. >> thanks, steve. >> i'm going to read it. >> coming up. >> coming up. >> more from -- >> more from washington. >> washington. and our special coverage of the fiscal cliff continues and our guest host cliff robbins is here. we've got to talk to him. at 8:30 a.m. eastern. bob corker, remember his comments from yesterday, also democratic senator kent conrad who is not trying to get re-elected, so he may be forthcoming today on the path to compromise. ♪
wooohooo....hahaahahaha! oh...there you go. wooohooo....hahaahahaha! i'm gonna stand up to her! no you're not. i know. you know ronny folks who save hundreds of dollars switching to geico sure are happy. how happy are they jimmy? happier than a witch in a broom factory. get happy. get geico. fifteen minutes could save you fifteen percent or more. what i care about is reducing these deficits. not only will we have explosive growth in the markets, we'll have explosive growth in this country. >> how high will this market go in the face of the fiscal cliff? >> we've been taking advantage of volatility. on days we've panicked we'll have a buyer list ready. >> i think technology is kind of interesting. >> the second largest customer of china, the u.s., avoiding the
fiscal cliff will be very good for them. >> defense cuts will be around 9.4%. a lot of people trading on that. >> let's rise above. >> coming up our special coverage of the fiscal cliff negotiations continue we're going to try to find some common ground with republican senator bob corker and democratic senator kent conrad. as we head to a break take a look at u.s. equity futures which are setting up nicely for the day.
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welcome back to a special edition of "squawk box." becky quick and jim cramer are live in washington, covering the fiscal cliff negotiations. rise above mission critical. welcome back to our mission critical rise above d.c. coverage. i'm jim cramer along with my colleague and friend becky quick. we're here in washington today pushing lawmakers to rise above partisanship, seek compromise to avoid the fiscal cliff. joining us now, republican senator bob corker and democratic senator kent conrad. one after another, are we going to have a deal before year end? >> so, i think there will be a deal.
and i might be surprised. i don't think it will be a deal that i could support. i think we spent, unfortunately, all of this time talking about revenues. we've sort of been on the democratic side of the court. i don't understand why we've done that and why we haven't moved over to the entitlement side. at the end of the day, i'm probably the only foolish person here in washington. i've laid out the kind of entitlement reforms i think we need to have. but i realize the reason we sort of stayed down on the revenue side, even though house members are trying to figure out when they're going to rescue the 98%, whether it's before january 1st or after, the fact is that neither republicans or democrats really want to talk about entitlement reform. so it's my sense that there will be a deal. i doubt it's going to be a deal that bob corker can support. and i hope to be surprised. >> hold on a second. you made a lot of news over the weekend. people have been using you as the poster child for how there
is a compromise reach ed. and suggestion was you implied people took away you would be in favor of dealing with the revenue increases now and putting off the spending cuts until later. is that an invalid -- >> yeah, yeah. y'all were showing a little clip yesterday which was just to me -- what i'm saying is that as long as we stay on revenues and don't talk about entitlements we're never going to get to the right place. and, what i hope boehner does not do is give away the debt ceiling with any kind of deal, unless it's the real deal. the deal that solves our country's problems. we've got about a $4.5 trillion package that needs to be put in place. so what i was saying is, why don't we pivot to entitlement reform right now -- >> and give it six weeks? in the next six weeks? >> it's this period of time. to me this congress has spent more time on the fiscal cliff than any congress in the history of mankind. >> certainly. >> we know what every decision is and how much it costs. kent knows that, and if we kick the can down the road it is an
absolute travesty for our country. so what i'm saying is let's do it all right now, before the debt ceiling date comes. i'd like to do it before year end, but as everybody continues to focus on the revenue piece, we're never getting to the part that counts, and that's fearful to me. >> we've got two clocks, one to get the cliff avoided. then you're about to leave. you're a free agent. are we going to be able to get done in time? >> i think so. >> this may surprise people but i in part agree with senator corker. i think it is imperative that we do the big deal. you know, we are on the cusp of having the possibility of doing the big deal because if we took the president's revenue, we took the republican spending cuts, and we put them together, we'd have a package of more than $4 trillion. if you count what's already been done that needs to be enforced. you count the interest savings
from doing a package that large, and we'd be well over $4 trillion. we'd be in a $4.3 trillion, $4.4 trillion range, and we'd do an incredible -- we'd do an incredible gift -- give an incredible gift for christmas. >> nobody thinks those numbers are real. people are saying those are just their opening bids. that's just what they say out here in public so they can get to a better position. we'll find the middle ground when you get to it. you're saying don't get middle ground, take the heaviest of each side. >> negotiate up. so typical around here, we negotiate down. in this -- in this circumstance, let's negotiate up. and we could have a package that would then secure the economic future of the country for decades to come. we'd not only stabilize the debt, we'd begin to work it down in a fairly dramatic way over time. and none of these spending cuts are really so heavy. look, $500 billion out of health care --
>> can you find that? >> say you can't possibly do that. you know how much that is of a percentage of what we're going to spend over the next decade? 4%. we can't save 4%? that's what's missing in this discussion on the spending side, and on the revenue side. nobody ever puts it in perspective. how much are you saving? what's the total you're going to save -- >> we're thrilled to have you. you're clearly in a rise above spirit. senator corker how far are we really apart? >> well, i don't know. i mean, again, what we haven't done is conditioned this whole debate because we've been focused on the revenue piece. and you know the numbers are out there and the wealthy are saying candidly we know we've got skin in the game whether you call it rates or tax deductions. we just want you to solve the problem. i think we haven't spent enough time dealing with the solutions that have to come in place, have
you guys seen any specifics as it relates to the entitlement reforms? i know that we've laid something out. but we really haven't conditioned the american people for that. and that's what's been missing in the debate. and that's what many senate republicans are saying right now. hey, let's shift this debate over to entitlements, and let's do what kent just said. let's negotiate up let's get both sides of the equation in play. right now what's only being discussed is revenues. >> this is an incredibly, logical, sane conversation. >> i'm thinking the same thing. >> that's because we're saying in a senate office building at this point. this is probably the one place you can have that conversation. the other two parts of this party, beau the administration, the white house, the house, are not going to have a conversation like this. 're jump to either side of you. how do you get those two parties to come up with some sort of agreement that sounds exactly like what you two are talking about? >> i actually think that at the end of the day, we are very close to putting together the
grand bargain. because if you think about it, kicking this can down the road doesn't work. why doesn't it work? because early next year we're going to have to have a debt limit extension. can you imagine what that will be like absent the grand bargain being reached now? we'll be right back to task. we will be right back to putting markets at risk. right back to partisan divide. we will be right back to gridlock. so, we can avoid all that. it's right before us. and it's not that hard. that's what i think has been missing. >> let me tell you, any deal we're at a position right now in the united states. we can talk china. europe's been left behind. the only thing that's keeping us back is any deal. just get any deal if we can get 4% growth? >> it has to be a real deal that's north of $4 trillion. here's where kent and i might disagree. i agree that we can get to a grand bargain but it has to be one in my case where you've
actually made the decisions. i'm not going to do another process bill, i'm sorry. you know -- >> meaning -- >> i want -- let's implement the policies right now. i don't want to set up another committee, i don't want to give directions to committees to come back. you know there's an old adage here in the senate, there's nothing to be learned from the second kick in the shin from a mule. okay? we've already been down the path of a process. we had 12 really smart folks, six on each side, and i'm not willing to go down that route again. i want us to make the decisions now, i want the entitlement reforms put in place now, and i hope that speaker boehner will not negotiate a way the debt ceiling until those specific reforms are in place. that's been missing in this debate and that's what i've been trying to say over the last several days. >> i'm going to leave it on a positive note. because this was the most positive thing, even if you're a little bit away, it's really a victory for the american people. thanks to senator corker and conrad. level heads throughout this.
guys, back to you at hq. >> okay, jim. i just decided that, you know, if we get through this mayan apocalypse on december 21st. if we get through that, we got the debt ceiling -- man we can fix the fiscal cliff. we're going to hype -- i can't wait for the debt ceiling now. man is that going to be something, too. that's going to be our next thing. >> constant entertainment. >> oh, talk about it. >> you've got -- you think this is brinksmanship. when is the deadline? i can't wait. >> it's february, right? the beginning of february. >> what's the slogan for that? >> let me come up with that. >> negotiate up. >> we don't want this to end with the fiscal cliff. we got -- and it won't. anyway -- >> how about the s&p 500? >> coming up the hunt for yield at times of uncertainty. institutional investors looking for alternatives to the lower return on fixed income. we're going to talk to the north carolina treasurer and the co-founder of investment firm cambridge associated.
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it gives us 5x the rewards on our internet, phone charges and cable, plus at office supply stores. rewards we put right back into our business. this is the only thing we've ever wanted to do and ink helps us do it. make your mark with ink from chase. welcome back to "squawk." the nation's pension funds and endowments are feeling the pressure of low interest rates on their portfolios.
joining us now on the set is james bailey, cofounder of cambridge associates, leading adviser to more than 900 endowments, sovereign wealth funds and pensions globally. and from raleigh, north carolina janet cowell, the treasurer of the state of north carolina. she oversees more than $70 billion. and we're pleased to have both of them here. i'm going to start with you, what do you do with this awful environment in that respect? is it an awful environment? maybe it isn't. >> actually it starts with endowment funds thinking about the long term. and when we look at the long term, i would say we're more optimistic, particularly about the u.s., than the current kind of thatter. a lot of secular things going on that make the u.s. look like a better place to invest for employer issues such as the shale oil, shale gas. >> right. >> issues such as better
competitiveness with china. and so we're optimistic about the long-term. we have to get over this short-term problem, and i think -- >> do you advise clients -- you've put money with cliff for example. he used to be a private equity guy. what is your split between how you see private equity and how you see the world hedge fund? >> we continue to be a big proponent of private equity. if you look among our clients we typically have something like 8% to 10% in private equity and another 5% or 6% in venture. we're big proponents of that. what we liked about what cliff has done is they've taken a private equity approach to public markets and they've done it in a cooperative kind of way. and that's been very effective at improving the performance of individual companies, and generally in good returns for the buyer. >> janet, what are you thinking these days? how tough is it out there? >> well, we have about 30% of our money in fixed income and we're expecting about 2.5% return on that over the next
three to five years. so clearly we've got to move into some higher return options. >> what's your threshold these days? what do you need to hit in terms of a rate of return to make your numbers? >> our target rate of return is 7.25%. so clearly with a third in fixed income, the math doesn't really work so we'll be moving out of some of that fixed income. the options we're looking at are other credit related assets. we've done a good amount of residential mortgage-backed securities. commercial mortgage-backed securities and we were getting pretty high double digits on those. we're still expecting in the future to get high single digit and maybe some double. we've done more sort of real asset kinds of things, so we have certainly i think jim just mentioned energy, we have done oil and gas, natural gas, solar, a whole range and we've done that a lot in the united states. but also global. >> janet, we're really dealing from a position of strength. i know you've got a aaa rating
from all three agencies and almost a fully funded pension plan so you're really in a position to make some changes dealing from strength. are you going to be migrating more of your assets out of fixed income or just looking within your nonfixed income pool and doing some more different things? >> well, you know, in the very short term we'll probably -- it will serve us well with the fiscal cliff issues, since the equity markets will probably be very volatile. but, next year we would certainly be looking to move some of the money out of that fixed income pool, and into both, you know, some more private sector s assets like i just mentioned. >> janet are you doing anything specific around the fiscal cliff? >> we are not changing our asset allocation for that. because, again, i think with our fixed income portfolio, we're seeing that flight to quality right now, we are well positioned for that. and then also i think, there will also be a flight probably into things -- we're not heavy gold investors but we do have money in natural resources. >> i have a question for jim. you know, jim, you've got a global business on the ground,
around the globe, and i know you're a key adviser to some of the largest sovereign wealth funds in the world, chinese, abu dhabi, middle east. those funds, as they're looking and wondering what's happening here in the u.s. and seeing this self-imposed fiscal cliff and all the uncertainty that we've created does it make those foreign key investors less willing to invest or lend to us? what are they -- how are they feeling about what they're seeing here? >> what i would say is they're very concerned. and certainly every time we go and speak to them, they express that concern. they ask questions about it. having said that, they don't have a lot of other places to go. if you're sitting there, trying to -- we don't really have a lot of other places to put 2.5 trillion dollars. and similarly in abu dhabi or saudi arabia or whatever. so the truth is, they're rooting for us to figure out how to get through this crisis. but they're investing still in dollars. >> janet, i've got a quick
question semiunrelated to this, has to do with facebook and i know you're one of the lead plaintiffs in the facebook ipo suit. can you tell us where this stands? >> well we were happy to be lead plaintiff on that. the reason we felt strongly about that is there's a whole trend among some of these high-tech ipos, kind of stripping shareholders of their rights. or certainly weakening shareholders' rights. and it's sort of ironic the logo for facebook is a big "f," because that's their corporate governance score. >> ooh. >> ooh. >> that raises a question in my mind, janet about corporate governance. i know you and i both believe that good corporate governance leads to better returns and you've become a thought leader in the whole corporate governance space. what are you doing with respect to taking your views on corporate governance, and having that impact how you're managing the north carolina funds? >> well, i mean, certainly one of our top priorities is loss recovery. 23 we have suffered losses like in facebook or with other investments, as a fiduciary
that's my top priority. but we are, you know, taking stands on just trying to increase shareholder rights, working with other pensions to make sure that our board votes count on things like executive pay, executive compensation, which is always, you know, a hot topic still with so many americans having job loss, and lower salaries. >> guys, we're going to have to leave it there. but we really appreciate your conversation. so i need to thank janet cowell and jim bailey. >> thanks so much. >> coming up more from our guest host cliff robbins. plus the flight from france. why a french icon is packing up and moving to belgium. [ male a] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪
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75% of income above 1 million euros. belgium's top rate, 50%. coming up at the top of the hour -- >> he's got to stay away from that rich french food, i think. >> do you remember what he looked like as a young man? >> you see pictures of him on youtube. >> for his health, i'm looking out for him. >> he's a large man. anyway, our special coverage from washington continues with congressman from each side of the aisle, representatives are going to join becky and jim to talk debt negotiations. but we have more from our guest host, cliff robbins. we're going to give him the last word when squawk returns. tomorrow, "squawk box" exclusive coverage of the new york times conference, investing, the economy and the looming fiscal cliff. jpmorgan chairman and steve schwarzman, and david ruben stein and a lot more.
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last word. >> i just want to understand, we keep calling him activist, but i think of carl ikahn -- >> you're absolutely right, it is different. >> they're into collaboration by forcing you to collaborate. >> we've invested in 30 companies over eight years. never sued a company. it really comes back to my experience in 20 years in the private equity business, i think we're good at sizing up and collaborating. we're investing in companies that want us as lead stockholders and there's unlocked value. >> when i look at the retail investor who watches this program, do they have the same opportunity as you have? you only will buy a stock or into a company if you've met with management, talked to them and decide you like them. >> yeah, that's exactly right. that's why we like this sort of private equity approach to the private markets and the public
strategies. the good thing for public sto stockholders they can invest as well. it's for all stockholders. public stockholders can participate alongside us. >> would you ever go hostile? >> we never have in eight years, and i don't think we ever would. >> and how in the nitty-gritty -- we're talking about transparency and compensation in the last segment with janet. how important is that stuff to you relative to the actual business? >> i think it's very important to invest with a team with a lot of integrity, a smart person. we're focusing on the quality of the conversation. fe want a team that's probing, looking for new ideas, looking for value. that's who we want to partner with. >> it's unlikely to be a good blue harbor investment. >> accurate for private equity in the last election? >> private equity, people have been buying and selling
companies since the stone age. >> is it positive for society? >> i think it is. there are companies that need to be private. >> one of the arguments is, you're making it in a way, why does it have to be done in private? couldn't it be done in public? >> we're avoiding paying the premiums. we're not paying the premium, we're buying at market. but there are companies that should be private. and private equity is a very good model. >> how levered are your investments? >> not levered at all. sometimes our ideas put leverage on a company, sometimes there are ideas to deleverage a company. we're a common stock in the market like all the stockholders. >> people can follow along, if they follow their filings. >> they can. >> this creative disruption, and unfortunately there are times when companies need to shrink, and it's a tough -- we've had a lot of false choices in the